Behavioural finance

I have a friend who is a brilliant technical analyst. Make no mistake, I have seen tons of Tech analyst, he is among the very top.

I do not like Tech Analysis, esp because I rarely take SIGNIFICANT trading position. Even though there are many companies which I KNOW are terribly over-rated, I do not buy put options.

This tech analyst does not take a position in any share EVER. He has an investment portfolio which his brother handles. He actually does not know or care about it. This because he feels if he knows what he has HE WILL GET BIASED.

I know one CIO who does not tell his analysts what he is going to do with a particular report. Let me explain. If the CEO /CIO says….’Mr. Analyst I wish to add some Tata Motors to our portfolio tell me what you think’, THE BIAS HAS ALREADY STARTED.

Recently I met a friend who has a big position in a listed company….and the price was coming down (his view was it SHOULD NOT be coming down, i thought IT SHOULD be coming down). He said I do not know why the price is coming down.

His FUNDAMENTAL ANALYST said ‘there is no news in the company for the price to come down’….

I was a little amused, I still thought the share was over-priced.

He corrected his analyst and said ‘Subra is saying it should come down, WE are holding a different view’…please remember “THERE IS SOMETHING IN THE MARKET because of which the share price is coming down. Remember, prices move based on cash flow. There must be some news WHICH WE ARE UNABLE to see. Just take a more hard look at the quarterly numbers.”

He then added:

“Never say there is no info AS A CONTRARIAN VIEW is normally not visible UNLESS you have the discipline to stand still and watch and observe……” Well said dost…:-)

that is what distinguishes a good investor (smart) from a not so smart investor…..

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